Breach of Fiduciary Duty

Owensboro, Kentucky Financial Advisor suspended by FINRA

Published on: July 19, 2024 | by Greco & Greco, P.C.

A long-time investment advisor with Cantella & Co. based in Owensboro, Kentucky was recently suspended by FINRA for alleged wrongful conduct. Pursuant to FINRA Rule 9216, Gleason submitted a Letter of Acceptance, Waiver, and Consent (AWC) aimed at settling alleged violations and avoiding future repercussions from FINRA based on the same findings.

Gleason’s career spanned several decades, commencing in 1985 when he first registered with FINRA. However, recent disclosures by former employers have brought his practices under scrutiny by FINRA. According to his FINRA Brokercheck report, his association with Cantella & Co., Inc., ended with him being “discharged” due to “Concerns regarding the origin of notations added to firm-requested Active Account and Concentration client letters.”

The AWC focused on Gleason’s actions between July 2020 and June 2021, during which he allegedly breached the Best Interest Obligation under Rule 15l-1(a)(1) of the Securities Exchange Act. This rule mandates that brokers prioritize clients’ interests over their own when recommending investments. According to the AWC: “Gleason recommended to a retail customer (Customer A) a series of transactions that were excessive in light of the customer’s investment profile. In so doing, Gleason placed his interests ahead of the interests of the customer.” The AWC further stated that this pattern of behavior resulted in significant costs for Customer A, including substantial commissions despite modest account balances.

Bethesda, Maryland Stock Broker Barred by FINRA

Published on: July 12, 2024 | by Greco & Greco, P.C.

FINRA recently issued a Letter of Acceptance, Waiver, and Consent (AWC) against financial advisor Andrew J. Egber which results in his bar from the industry by FINRA. According to FINRA’s Brokercheck report, Mr. Egber had previous offices in Rockville and Bethesda, Maryland and was previously registered to sell securities with Wells Fargo Clearing Services, Raymond James Financial, and Steward Partners Investment Solutions. Brokercheck further reports two customer complaints regarding “outside investments.”

The AWC which can be found here states that “On March 3, 2024, Wells Fargo filed an amendment to Egber’s Form US, which stated that the firm had initiated an internal review and was “reviewing allegations of possible theft of client funds” by Egber.” It further states that Mr. Egber refused to provide information and documents to FINRA and further refused to appear for on the record testimony in violation of FINRA Rules 8210 and 2010.

Greco & Greco have been representing harmed customers in the Maryland/Virginia/DC area for over 25 years. Many of our cases have involved financial advisors selling investments that were not approved for sale by their FINRA firm, or using alleged investments as means to convert and steal customer funds. In these situations the firms that have a duty to supervise their advisor can and should be found liable for the wrongdoing of their advisor. If you were harmed by the actions of your stockbroker, please contact Scott Greco for a free attorney consultation regarding your potential case.

FINRA bars Alexandria, Virginia Wells Fargo advisor

Published on: May 17, 2024 | by Greco & Greco, P.C.

The Financial Industry Regulatory Authority (FINRA) recently barred a financial advisor from Alexandria, Virginia who had been registered with Wells Fargo Clearing Services LLC. According to the FINRA AWC (Letter of Acceptance, Waiver, and Consent), FINRA began an investigation into whether Paul Trimber “converted a senior customer’s funds for his personal use and benefit…” Mr. Trimber allegedly refused to produce documents in response to FINRA’s requests in the investigation, resulting in FINRA’s bar from Mr. Trimber associating with any FINRA member.

According to FINRA’s Brokercheck report, Mr. Trimber was terminated by Wells Fargo in February 2024 for the following reason: “Financial Advisor discharged after he admitted during review to making unauthorized transfers of client funds to recipients outside of the Firm.”

Financial Advisors occupy positions of trust and access to accounts that unfortunately can result in the theft of customer funds. In such situations, the brokerage firms for which the advisor is registered also bear responsibility for their advisors’ criminal actions, and also can be found liable for failures to supervise the wrongful activity.

The SEC fines multiple financial firms for failing to preserve text communications.

Published on: March 8, 2024 | by Greco & Greco, P.C.

The Securities and Exchange Commission (SEC) recently announced significant penalties against sixteen firms for widespread recordkeeping failures, amounting to over $81 million in combined fines. Among the firms involved were Northwestern Mutual Investment Services LLC, Guggenheim Securities LLC, Oppenheimer & Co. Inc., Cambridge Investment Research Inc., Key Investment Services LLC, Lincoln Financial Advisors Corporation, U.S. Bancorp Investments Inc., and The Huntington Investment Company. The penalties stem from the firms’ failure to maintain and preserve electronic communications, a violation of federal securities laws. These actions highlight the SEC’s commitment to enforcing compliance with recordkeeping requirements essential for monitoring and enforcing securities laws.

Of particular note is The Huntington Investment Company’s case, which stands out due to its self-reporting and cooperation with the SEC. As a result, Huntington was ordered to pay a lower civil penalty compared to other firms, totaling $1.25 million. This demonstrates the importance of voluntary disclosure and cooperation in regulatory investigations.

The investigations uncovered widespread use of unapproved communication methods, such as personal text messages, across all sixteen firms. Employees at various levels, including supervisors and senior managers, were involved in these violations. The failure to maintain and preserve required records potentially deprived the SEC of crucial information in various investigations.

LPL Financial sanctioned by FINRA for BDC supervisory failures

Published on: March 7, 2024 | by Greco & Greco, P.C.

The Financial Industry Regulatory Authority (FINRA) has issued a Letter of Acceptance, Waiver, and Consent (AWC) against LPL Financial LLC, a notable member firm in the securities industry. The AWC alleges a series of alleged rule violations that occurred over several years, painting a picture of insufficient supervision and inaccurate information dissemination to customers. Let’s delve into the details of this regulatory action and what it means for investors and the securities industry at large.

Background: LPL Financial LLC

LPL Financial LLC, a long-standing member of FINRA since 1973, operates as a significant player in the securities industry and is one of the larger “independent” FINRA firms. Headquartered in Fort Mill, South Carolina, LPL boasts a considerable network, with over 27,000 registered representatives across more than 18,000 branch offices. Most advisors who are registered with independent firms operate out of small one or two advisor offices. Although independent firms have the same supervisory duties and more traditional firms with big branch offices, proper supervision does not always occur.

J.P. Morgan fined for prohibiting harmed customers from contacting the SEC

Published on: February 23, 2024 | by Greco & Greco, P.C.

The Securities and Exchange Commission of the U.S. (the SEC) recently fined J.P. Morgan Securities $18,000,000 for taking various steps to prevent securities whistleblowers from contacting the SEC or other securities regulators. J.P. Morgan agreed to the Order which can be found here.

The alleged wrongdoing centered on the language included by J.P. Morgan in its settlement agreements with its advisory and brokerage firm customers to which it paid over $1,000.00. Virtually all FINRA securities firms and Registered Investment Advisors require a confidentiality clause to be included in any settlement agreement with a customer. These settlement agreements are often the result of various misconduct by the firms or their advisors, such as securities fraud, breach of fiduciary duty, unauthorized trading, broker theft, recommended unsuitable investments, and churning. The reason why securities firms always require their settlements to be confidential is clear – they wish to hide their misconduct and the misconduct of their advisors from the public. FINRA’s Brokercheck report does require firms to disclose settlements with advisors/firms, but the details are often extremely general, and one has to look up the broker directly to find the disclosures.

According to the SEC Order, from 2020 to 2023 J.P. Morgan included language in 362 release agreements that prohibited customers not only from disclosing the amount of the settlement to the SEC, but also prohibited disclosing the facts related to the account (i.e. the misconduct). Although the releases did allow disclosure to the SEC in response to an inquiry, it did not allow the customers to initiate contact with the SEC.

Atlanta Investment Adviser Sentenced for Ponzi Scheme

Published on: February 9, 2024 | by Greco & Greco, P.C.

An Atlanta, Georgia area investment adviser, John Woods, was recently sentenced to 8 years in prison for his role in operating a ponzi scheme. Operating over a staggering 13-year period, Woods defrauded more than 400 individuals, including retirees, seniors, and military veterans, resulting in a loss exceeding $49 million. Under the guise of his fund, “Horizon Private Equity,” Woods promised lucrative returns of six to seven percent to potential investors, claiming minimal risk and a diverse portfolio. However, investigations revealed that the money collected from new investors was used to pay returns to earlier investors, constituting a classic Ponzi scheme.

The case underscores the importance of regulatory vigilance in the investment industry. Despite assurances of safety and profitability, Woods’s actions demonstrated a flagrant abuse of trust, ultimately causing financial ruin to hundreds of victims across 20 different states.

Investment Advisers are fiduciaries, and as such they owe their customers duties of care and loyalty, both of which were flagrantly breached in this situation. Mr. Woods was a longtime investment adviser representative at Oppenheimer & Co., Inc.

Los Angeles, California Western International Broker barred for Churning

Published on: February 8, 2024 | by Greco & Greco, P.C.

The Financial Industry Regulatory Authority (FINRA) recently issued a disciplinary order against Christopher Booth Kennedy, a former registered representative with Western International Securities, for a series of egregious violations. The order which can be found here, stemming from a complaint filed by FINRA’s Department of Enforcement, outlines Kennedy’s misconduct between July 2020 and July 2021. During this period, Kennedy engaged in churning and excessive trading in the accounts of six customers, resulting in significant financial losses. The Order bars Kennedy from associating with a FINRA firm.

Kennedy’s actions, as detailed in the findings and conclusions of the order, paint a troubling picture of misconduct and deceit. He directed over 5,300 trades totaling more than $350 million in the accounts of six customers, with an average of 102 trades per account each month. These excessive transactions generated substantial commissions for Kennedy while causing substantial losses for his clients. Moreover, Kennedy went to lengths to conceal the true extent of these losses by fabricating account statements and providing false information to his clients.

The disciplinary order found Kennedy in violation of several securities regulations, including Section 10(b) of the Securities Exchange Act of 1934, Regulation Best Interest, and various FINRA rules.

Former New Jersey Wells Fargo broker indicted for theft of customer funds

Published on: November 18, 2023 | by Greco & Greco, P.C.

A former stockbroker / investment advisor from Bergen County, New Jersey, has been indicted for allegedly stealing over $3 million from five unsuspecting clients. Kenneth A. Welsh, 42, of River Edge, has been charged with four counts of wire fraud and one count of investment advisor fraud, as announced by U.S. Attorney Philip R. Sellinger on November 16, 2023.

According to the indictment, from July 2017 through March 2021, Welsh, operating as a financial advisor registered with Wells Fargo Clearing Services, purportedly abused his position to misappropriate funds entrusted to him by clients. Instead of responsibly managing their investments, Welsh is accused of diverting substantial sums into accounts under his control, leaving his clients in financial distress. The charges carry severe penalties, with each wire fraud count potentially leading to 20 years in prison and a $250,000 fine, while the investment advisor fraud count could result in five years behind bars and a $10,000 fine, or twice the gross gain or loss from the offense.

The indictment details that Mr. Welsh allegedly used multiple fraudulent means to siphon off customer funds, including having customers sign forms in blank, fraudulently forging signatures, and carrying out unauthorized wires from customer accounts.

Maryland/DC Area Transamerica Agent Barred by FINRA

Published on: October 17, 2023 | by Greco & Greco, P.C.

Lickhai Quach, a Silver Spring, Maryland broker/agent of Transamerica Financial Advisors, Inc., was recently barred by FINRA from association with any FINRA firm. The FINRA Letter of Acceptance, Waiver, and Consent states that Mr. Quach refused to produce documents or information to investigators as required by FINRA Rule 8210.

Mr. Quach was allegedly under investigation by FINRA as a result of being permitted to resign “while under review by the firm for violating firm’s policy related to borrowing funds from a client.” Mr. Quach’s FINRA Brokercheck report states that he was registered with Transamerica since 2012. The report further states that he had one recent customer complaint relating to borrowed funds that settled, and that he was permitted to resign in March, 2023.

Registered financial advisors are generally prohibited from borrowing money from customers under FINRA Rule 3240 except in limited circumstances such as from a family member or other personal relationship. The loan must also be disclosed and approved by the advisor’s firm.